Concerns have been mounting about the American consumer amid the triple threat of higher gas prices, increased payroll taxes and delayed tax refunds. One of the biggest blows came in early February, after the leak of an internal Wal-Mart Stores email in which an executive warned that February sales so far were a "total disaster."

Penney said its fourth-quarter net loss was $428 million, bringing its full-year loss to $985 million.

Excluding items, the retailer reported a loss of $1.95 a share, compared with a 74-cent profit in the year-earlier period. Analysts had expected a much smaller loss of 18 cents a share, according to a consensus estimate from Thomson Reuters.

Revenue decreased to $3.88 billion from $ 5.43 billion a year ago. Analysts had expected the company to report $4.08 billion in revenue.

Same-store sales fell 32 percent during the quarter, compared with a 2-percent drop in the year-earlier period.

Analysts had already been expecting same-store sales to decline 27.8 percent, but the even weaker figure put huge pressure on Johnson.

"He's going to have recover this year or he's done," said Ron Friedman, retail practice leader at the consulting firm Marcum LLP. "He's running out of time. He has to have it turned around by the third quarter."

In a conference call after the earnings report, Johnson said the company has brought back sales and coupons after doing away with both in their recent restructuring effort. Johnson said J.C. Penney will begin offering weekly sales.

"Ron Johnson basically just admitted that he's made a mistake — that the consumer has voted and they vote for discounts. So, he's going back to discounting," retail analyst Stacey Widlitz said in a phone interview on CNBC's "Fast Money."

"This company spent a billion dollars in the last year to take away discounts and do a 180 and go back to where they came from. And he's still choosing to call the discounts a gift," she said.

Widlitz said she thinks J.C. Penney lost "a good chunk of their consumers" due to the fact that they took the coupons and discounts away. If they get aggressive in trying to woo back customers they may get some back, she added.

J.C. Penney's gross margin was 24 percent, which the company attributed to lower-than-expected sales and a higher level of clearance merchandise that was related to inventory reductions. That's down from 30 percent a year ago.

The poor results for the quarter, which included the holiday season, capped a rough first year for Penney's turnaround effort.

Other retailers, including Macy's, Target, Home Depot, and Lowe's beat expectations with their earnings reports despite concerns about the consumer. Wal-Mart also beat but its first-quarter outlook was disappointing.

J.C. Penney and rival department store Macy's are involved in an ongoing lawsuit over a partnership with Martha Stewart. The suit centers around whether Macy's has the exclusive right to sell Martha Stewart-branded products.